The Austrian Case for the Free Market Process

Ludwig von Mises (18811973) and Friedrich Hayek (born 1899) were perhaps the foremost defenders of the free market and limited government during the midtwentieth century ascendancy of Keynesian economics. Mises highlighted the problem of economic calculation in nonmarket economics. He saw the price system as the basis of economic calculation, and emphasized the importance of sound money for it to work properly. He denounced the government manipulation of money, and saw government credit expansion as the cause of the economic boom that collapsed in the Great Depression. Mises created an allencompassing theory of economics as a system of human action. Hayek emphasized the role of knowledge in economics, asserting that man cannot acquire the full knowledge that would make mastery of events possible. He advocated a competitive system of privately issued currencies of a superior alternative to government control of the currency. Hayek insisted that capitalism has improved the living conditions of workers, contrary to popular conceptions. Hayek received the Nobel Prize in 1974.